Should I Work In Investment Banking, Technology, Or At A Startup?

Are you deciding between working in investment banking, technology, or at a startup? I spent 13 years working in investment banking, 10+ years working in online media, and five years consulting in technology at startups.

If you want to work in investment banking (finance), consulting, or tech (startup), then you may want to go to an Ivy League school. The median income for Ivy League graduates is higher than non-Ivy League graduates because roughly 60% of graduates go into one of these sectors.

Below is the 2022 post-graduate employment by industry data for Harvard graduates. Notice the top three sectors.

2022 post-graduate employment by industry data for Harvard graduates

Investment Banking Is Where You Can Make The Most Money

If you want to get rich, I'd work at a bulge bracket investment bank. The chances of making a lot of money in investment banking is almost guaranteed if you can last for 10+ years.

Here’s the bulge bracket salary progression with analysts starting at an $100,000 – $110,00 base salary, plus $20,000-$60,000 cash bonus for the first full year. That's right, first-year analyst salaries at Goldman Sachs and Morgan Stanley have gone up in 2021+.

Investment banking compensation

Investment Banking Pays Better Than Tech & Startups

Not bad right? If you can last for 10 years in investment banking, you'll easily be able to break $500,000 a year. After 15 years, making over $1,000,000 a year is a distinct possibility, especially if you reach the title of Managing Director.

Technology startups pay like CRAP because they give you stock options and RSUs to make you feel like you’re getting a great package.

But the reality is, 80% of startups end up shutting down after 5 years. And, 10% of startups end up becoming Zombie companies that just tread water and never pay out. Beware of joining startups!

Working at big technology companies like Netflix, Facebook, Alphabet (Google), and Salesforce, on the other hand, is pretty good due to the perks and higher median pay.

You can see in the chart below that Facebook pays their typical employee $240,000 plus restricted stock units. Google pays $192,000. Not bad, with perhaps better work hours to boot.

Employee pay at large technology companies

If You Want Money, Choose Investment Banking Not A Startup

I’ve lived in SF since 2001 and know literally hundreds of people who joined startups thinking they’d get rich. Unfortunately, they only ended up renting and got way behind their peers financially because their multiple startups never went anywhere.

I’ve also consulted for three startups over several years: Sliced Investing, Personal Capital, and Motif Investing.

Sliced Investing, a Y-Combinator starutup was shut down after two years. And Motif Investing shut down in April 2020 after selling off some of its business to Charles Schwab. They had a great product, but had a hard time making money.

Empower is still chugging along after receiving Series E funding where I’m a shareholder. You can learn how Empower makes money here if you're curious. Actually, Empowerl end up getting sold to Empower in 2020 for over $800 million. Not bad!

If you want more money, take the guaranteed path to comfortable wealth through investment banking. I went this route for 13 years. In the process, I saved up enough to spit out about $78,000 in passive income when I was 34, negotiated a severance that year, and have been absolutely free since.

Be Ready For Long Hours In Investment Banking

Investment banking is a sure thing due to the higher base pay if you survive and can take the long hours. They raised base salaries by 60% or so after the financial crisis. Investment banks were under scrutiny for paying huge bonuses. Pretty good side effect yeah? Brush up your resume though because competition is fierce.

Working at a startup is like taking a big gamble that is more than likely NOT going to pay off. There's asymmetric risk and reward because you're working your tail off for so little equity. You're essentially trying to make the founders rich!

Check out this post: If You Join A Startup, Sleep With One Eye Open, for an interesting case study and more details.

Related posts:

Who Makes A Million Dollars A Year? Exploring The Top 0.1% Income Earners

Bankers, Doctors, Techies: You'll Never Get Rich Working For Someone Else

Cashing Out By Negotiating A Severance Is Key

About the Author: Sam worked in finance for 13 years. He received his undergraduate degree in Economics from The College of William & Mary and got his MBA from UC Berkeley. In 2012, Sam was able to retire at the age of 34 largely due to his investments that now generate roughly $250,000 a year in passive income. He spends time playing tennis, taking care of his family, and writing online to help others achieve financial freedom too.

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